Supreme Court Sets Aside Contempt Proceedings in SBI Loan Default Case

The Supreme Court of India has set aside the contempt proceedings initiated by the Punjab & Haryana High Court against Agyapaul Singh, a petitioner in a loan default dispute with the State Bank of India (SBI). The Court ruled that the High Court must allow the appellant to file a reply before deciding whether contempt of court was committed.

Background of the Case

The case stems from a financial dispute between Agyapaul Singh and the State Bank of India (SBI) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The High Court, in an earlier order dated June 1, 2016, had permitted the petitioner to withdraw his case and approach the Debt Recovery Tribunal (DRT) for relief.

The order also directed:

• The bank to defer encashment of a cheque worth Rs. 7.5 crores until July 25, 2016.
• The District Magistrate, Ludhiana, to adjourn proceedings under Section 14 of the SARFAESI Act until July 31, 2016.

However, when the cheque was presented after the deadline, it was dishonored, leading the High Court to initiate contempt proceedings against Agyapaul Singh.

Arguments by the Appellant

Agyapaul Singh contended:

• The dishonor of the cheque alone did not amount to willful disobedience of the court’s order.
• He was not given an opportunity to file a reply before the High Court proceeded with contempt proceedings.
• Contempt should only be established after determining intent and circumstances surrounding the non-compliance.

Supreme Court’s Observations

The Supreme Court found procedural lapses in the High Court’s approach. The Court ruled:

“Whether there is a willful or deliberate disobedience of the order passed by the Court is something to be seen from the reply filed by the appellant to the show cause notice.”

The Court further stated:

“Even before issuing a show cause, we find that the High Court has entered a satisfaction that contempt of court has been committed.”

The Supreme Court held that such a finding was premature and procedurally incorrect.

Final Judgment

• The Supreme Court set aside the Punjab & Haryana High Court’s order initiating contempt proceedings.
• The High Court was directed to allow Agyapaul Singh to file his reply before forming an opinion on whether contempt proceedings should continue.
• The Court requested that the High Court not insist on the personal presence of the appellant until a final decision is reached.

Conclusion

This ruling reinforces the principle that contempt of court proceedings should follow due process. It establishes that a court must allow the accused to present a defense before making a determination of contempt.

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Download Judgment: Agyapaul Singh vs State Bank of India Supreme Court of India Judgment Dated 23-01-2017.pdf